Mirco test 2

5. If the demand for donuts is elastic, then a decrease in the price of donuts will (a) increase total revenue of donut sellers. (b) decrease total revenue of donut sellers. (c) not change total revenue of donut sellers. (d) There is not enough information to answer this question.

a.

14. The effective price received by sellers after the tax is imposed is (a) $3. (b) $4. (c) $5. (d) $6.

a.

15. How much tax revenue does this tax produce for the government? (a) $18. (b) $30. (c) $6. (d) $36.

a.

2. The price elasticity of demand measures (a) buyers responsiveness to a change in the price of a good. (b) the extent to which demand increases as additional buyers enter the market. (c) how much more of a good consumers will demand when incomes rise. (d) the movement along a supply curve when there is a change in demand.

a.

22. When a country allows trade and becomes an exporter of a good, (a) domestic producers gain and domestic consumers lose. (b) domestic producers lose and domestic consumers gain. (c) domestic producers and domestic consumers both gain. (d) domestic producers and domestic consumers both lose.

a.

17. Suppose Raymond and Victoria attend a charity benefit and participate in a silent auction. Each has in mind a maximum amount that he or she will bid for an oil painting by a locally famous artist. This maximum is called (a) deadweight loss. (b) willingness to pay. (c) consumer surplus. (d) producer surplus.

b.

19. When the tax is imposed in this market, producer surplus is (a) $450. (b) $600. (c) $900. (d) $1,500.

b.

25. Tariffs and quotas are different in the sense that (a) tariffs cause deadweight losses, while quotas do not cause deadweight losses. (b) tariffs raise revenue for the government, while quotas do not raise revenue for the government. (c) tariffs enhance the well-being of domestic consumers, while quotas diminish the well-being of domestic consumers. (d) tariffs enhance the well-being of domestic producers, while quotas diminish the well-being of domestic producers.

b.

3. When quantity demanded responds strongly to changes in price, demand is said to be (a) fluid. (b) elastic. (c) dynamic. (d) inelastic.

b.

7. If a price ceiling is not binding, then (a) the equilibrium price is above the price ceiling. (b) the equilibrium price is below the price ceiling. (c) it has no legal enforcement mechanism. (d) None of the above is correct because all price ceilings must be binding.

b.

10. If the government removes a tax on a good, then the price paid by buyers will (a) increase, and the price received by sellers will increase. (b) increase, and the price received by sellers will decrease. (c) decrease, and the price received by sellers will increase. (d) decrease, and the price received by sellers will decrease.

c.

11. A tax on sellers will shift the (a) demand curve upward by the amount of the tax. (b) demand curve downward by the amount of the tax. (c) supply curve upward by the amount of the tax. (d) supply curve downward by the amount of the tax.

c.

12. Suppose a tax of $2 per unit is imposed on this market. What will be the new equilibrium quantity in this market? (a) less than 50 units (b) 50 units (c) between 50 units and 100 units (d) greater than 100 units

c.

18. Henry is willing to pay 45 cents and Janine is willing to pay 55 cents for 1 pound of bananas. When the price of bananas falls from 50 cents a pound to 40 cents a pound, (a) Henry experiences an increase in consumer surplus, but Janine does not. (b) Janine experiences an increase in consumer surplus, but Henry does not. (c) both Janine and Henry experience an increase in consumer surplus. (d) neither Janine nor Henry experiences an increase in consumer surplus.

c.

23. A tariff (a) lowers the domestic price of the exported good below the world price. (b) keeps the domestic price of the exported good the same as the world price. (c) raises the domestic price of the imported good above the world price. (d) lowers the domestic price of the imported good below the world price.

c.

24. As a result of the tariff, there is a deadweight loss that amounts to (a) B (b) E (c) D+F (d) B+D+E+F

c.

4. Using the midpoint method, if the price falls from $150 to $100, the absolute value of the price elasticity of demand is (a) 0.4. (b) 0.9. (c) 1.1. (d) 2.0.

c.

6. The presence of a price control in a market for a good or service usually is an indication that (a) an insufficient quantity of the good or service was being produced in that market to meet the public's need. (b) the usual forces of supply and demand were not able to establish an equilibrium price in that market. (c) policymakers believed that the price that prevailed in that market in the absence of price controls was unfair to buyers or sellers. (d) policymakers correctly believed that price controls would generate no inequities of their own once imposed.

c.

8. To say that a price floor is binding is to say that the price floor (a) results in a shortage. (b) is set below the equilibrium price. (c) causes quantity supplied to exceed quantity demanded. (d) All of the above are correct.

c.

1. In general, elasticity is a measure of (a) the extent to which advances in technology are adopted by producers. (b) the extent to which a market is competitive. (c) how firms profits respond to changes in market prices. (d) how much buyers and sellers respond to changes in market conditions.

d.

13. The price paid by buyers after the tax is imposed is (a) $3. (b) $4. (c) $5. (d) $6.

d.

16. Welfare economics is the study of (a) taxes and subsidies. (b) how technology is best put to use in the production of goods and services. (c) government welfare programs for needy people. (d) how the allocation of resources affects economic well-being.

d.

20. When the government imposes the tax in this market, tax revenue is (a) $600. (b) $900. (c) $1,500. (d) $3,000.

d.

21. The price of sugar that prevails in international markets is called the (a) export price of sugar. (b) import price of sugar. (c) comparative-advantage price of sugar. (d) world price of sugar.

d.

9. A binding minimum wage tends to (a) cause a labor surplus. (b) cause unemployment. (c) have the greatest impact in the market for teenage labor. (d) All of the above are correct.

d.